(Reuters) - Citigroup Inc (N:C) said it has agreed to sell its consumer finance unit OneMain Financial Holdings Inc to subprime lender Springleaf Holdings Inc (N:LEAF) for $4.25 billion in cash.
The sale of OneMain is a major step in the No. 3 U.S. bank's plan to sell unwanted assets and focus on wealthier clients.
Citigroup's shares were up nearly 1 percent at $54 in premarket trading on Tuesday.
OneMain provides personal loans for meeting unexpected expenses such as medical bills or car repairs and for buying small-ticket items such as refrigerators and televisions.
The consumer finance company is part of Citi Holdings, which Citigroup created during the financial crisis to park assets that it wanted to eventually divest or wind down.
Citigroup will use a part of the proceeds from the sale to retire certain funding that currently supports Citi Holdings, the bank said in a statement.
Citigroup said the sale, along with retirement of the related funding, is expected to add about $1 billion to earnings before income taxes.
Springleaf had prevailed over other bidders, including private equity firms, in an auction for OneMain, Reuters had reported in February.
OneMain and Springleaf are the only sizable national participants in the consumer lending industry serving the large and growing population of non-prime customers.
The transaction is expected to add to Springleaf's after-tax earnings in 2015, the company said in a statement.
Bank of America Merrill Lynch (NYSE:BAC), Barclays (LONDON:BARC), Credit Suisse and Goldman Sachs (NYSE:GS) are Springleaf's financial advisers, while Skadden Arps Slate Meagher & Flom LLP is legal counsel.
Citi is OneMain's financial adviser and Davis Polk & Wardwell is its legal adviser.